Northampton County and Easton squabble over commuter tax

A day after Easton Mayor Sal Panto Jr. called for increasing an income tax on workers who commute to his city, Northampton County officials called for the tax's abolition.

County council unanimously approved a resolution Thursday night condemning the commuter tax, which takes a portion of non-resident workers' incomes and puts it toward the city's ballooning pension obligations.

"Northampton County Executive John Brown is respectfully requested to take all actions to prevent the implementation of the Easton commuter tax, including the suspension of collection…," the resolution says.

Northampton County District Attorney John Morganelli also recommended the county stop paying the tax until its fate is decided.

Opponents of the tax are emboldened by a recent court decision that declared a similar tax in Scranton illegal.

"It sounds very tongue and cheek to say this," county Controller Stephen Barron said, "but it's taxation without representation. … We fought a war over this."

Panto says he's confident Easton's commuter tax is legal. Though the city has only levied the tax since 2013, Pennsylvania law has permitted the practice for decades.

For 2015, Easton's proposed 1.95 percent tax is expected to raise about $2 million toward the nearly $5 million owed in pensions. The remaining $3 million would come from an earned income tax and other funding sources.

The non-resident income tax was 1.75 percent in 2014.

"It's $2 million. It would bankrupt us," Panto said. "The county politicians are trying to make a political heyday."

On Tuesday, Philadelphia Senior Judge John Braxton ruled that 0.75 percent commuter tax proposed in Scranton wasn't legal because it targeted commuters and didn't charge city residents equally, according to the Times Leader of Wilkes-Barre.

Morganelli recommended the county should "consider suspending taking money out of paychecks," or possibly putting the money in escrow until a decision had been made.

"I have high admiration for Mayor Panto," Morganelli said. "He can still [levy the tax], but he has to tax everybody."

However, Easton already charges its residents a 1.95 percent earned income tax, the bulk of which pays for pension costs.

"I'm not a fan of paying more taxes than I have to," Brown said, adding the same goes for county employees. Brown said he's asked his solicitor to review the Scranton court decision.

But Panto says state laws back him up. In fact, one law that allows the tax has been on the books for 30 years — Act 205 of 1984. The state Legislature passed the 2009 Municipal Pension Funding Standard and Recovery Act, which further clarified the law.

Both acts allow cities with distressed pension funds to tax non-residents and use the money to pay for pensions. Reading and Allentown also tax commuters.

On Wednesday, Panto submitted the city's $33 million 2015 budget proposal to the Easton City Council. It pruned a number of programs and a handful of jobs to wipe out a $2 million deficit.

But, as usual, Panto's budget included no property tax or fee increases for city residents. Property taxes haven't gone up in Easton since 2008.

The same isn't true for workers outside the city limits, however. The city started collecting a 1 percent commuter tax in 2013.

Panto said the 0.2 percent commuter tax increase would rake in about $400,00 in 2014 for the city's pension obligations. Panto told council he knew the tax was unpopular, and he had been hoping to do away with it.

Morganelli said about 50 of his employees would be effected by the increase.

"There is no bigger supporter of cities [than me]," Barron said, "but there has to be another way as opposed to taxing people without giving them a say."